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A JOINT ECONOMIC‐LOT‐SIZE MODEL FOR PURCHASER AND VENDOR
Author(s) -
Banerjee Avijit
Publication year - 1986
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1986.tb00228.x
Subject(s) - disadvantage , vendor , negotiation , purchasing , order (exchange) , position (finance) , microeconomics , joint (building) , economics , process (computing) , operations research , computer science , business , industrial organization , operations management , marketing , finance , architectural engineering , artificial intelligence , political science , law , engineering , operating system
In a typical purchasing situation, the issues of price, lot sizing, etc., usually are settled through negotiations between the purchaser and the vendor. Depending on the existing balance of power, the end result of such a bargaining process may be a near‐optimal or optimal ordering policy for one of the parties (placing the other in a position of significant disadvantage) or, sometimes, inoptimal policies for both parties. This paper develops a joint economic‐lot‐size model for a special case where a vendor produces to order for a purchaser on a lot‐for‐lot basis under deterministic conditions. The focus of this model is the joint total relevant cost. It is shown that a jointly optimal ordering policy, together with an appropriate price adjustment, can be beneficial economically for both parties or, at the least, does not place either at a disadvantage.